Most of us are familiar with the word Fixed Deposit (FDs). FDs are one of the safest investment methods, providing a steady and assured return on investment. They are popular amongst Indian investors. Market volatility does not affect FDs, ensuring guaranteed and predetermined returns from the offset. When investing, one must be careful to avoid capital loss and maximise the interest rate to achieve their investment goals.
Features of Fixed Deposits:
● The rate of interest is better than in a Savings Account.
● They are easy to open, with minimal documentation.
● Flexible tenure is a feature that allows the investor to avail of short-term benefits of higher interest rates.
● The investor cannot withdraw money from an FD before the completion of the tenure. If they do, they may have to pay penalties.
Top tips for getting the best returns on Fixed Deposits:
Here are some basic yet essential tips to help investors maximise returns on their investments:
Research the Institution:
Research the institution you choose to bank with carefully. Institutions with a high Crisil and ICRA rating are safe. In fact, the higher the rating, the safer your investment.
Check for the best rates of interest:
Shop around for the best interest rates because different banks and financial institutions offer different interest rates on FDs. Make sure to pick a reliable service provider with a competitive and attractive interest rate for your investments. Some small banks and NBFCs may offer higher rates than commercial banks. fd interest rates for senior citizens are eligible for higher rates of interest in comparison. Some financial institutions offer additional benefits for women. Keep all the above pointers in mind when choosing a banking partner.
Choose wisely between Cumulative and Non-Cumulative Fixed Deposit Schemes:
Investors must choose wisely between cumulative and non-cumulative FD schemes. Cumulative FD schemes can help you earn more which gets credited into the account at the end of the tenure. This is because of the compounding interest in the Cumulative FD plans.
On the other hand, non-cumulative FDs are ideal for investors looking for a reliable and fixed source of income. The banks credit the interest to the account depending on the investor’s instructions which can be either – monthly, quarterly, half-yearly, or annually.
If the goal is to maximise benefits, the Cumulative FD is the best option for the investor. A person looking for a regular income can opt for the Non-Cumulative FD Plan.
Spilt up the investment:
Split up your investment into smaller amounts. We can invest these in different accounts across multiple banks. Doing so ensures that you get the maximum benefits from the interest rate. Making smaller deposits is particularly helpful when money is urgently needed. If there are multiple FDs, the investor has to pay the fine only on the amount they need and need not liquidate the entire amount.
Choose a Varied Tenure of Deposit:
The tenure of an FD ranges from a minimum of 7 days to a maximum of 10 years. Rates of interest are different across different tenures. Financial experts suggest spreading the tenure of the deposit to get the maximum benefit from the interest rate. Financial experts also suggest diversifying investments across various tenures for maximum benefit from interest rates and liquidity. For example, an investment of Rs 5 lakh can be split into FDs of varied tenures. It allows the investor to get the maximum benefits of the interest rates and also ensures liquidity.
Choose the Scheme that suits you best:
If you are a person who needs liquidity of funds, the Flexi Fixed Deposit scheme is the best option for you. Some banks, like ICICI Bank, offer a Flexi Fixed Deposit. This scheme provides the investor with the benefits of a Savings Account and an FD. A Flexi Fixed Deposit Scheme provides the ease of a Savings Account with Fixed Deposit interest rates. This ensures quick disbursal of funds after approval.
Select a Suitable Mode of Operation:
Most banks and financial institutions have the option of offline or online modes of operations available for their customers. You can book an FD by visiting the nearest branch or booking it using internet banking. Investors usually have to visit the home branch (where the FD has been booked) to liquidate it. Some banks, such as ICICI Bank, offer the facility of liquidating the Fixed Deposit online.
Do not encash the FD before maturity:
Check if your bank offers the facility of premature withdrawal. What are your options if the bank doesn’t have an early withdrawal facility? The investor has two options. Firstly, investors can encash the FD prematurely. This attracts a penalty from the bank and reduces the interest rate on the balance amount as well. Alternatively, the investor can take a loan against the FD. The investor has to pay interest on the utilised amount when the loan is being used.
Interest earned from FD is taxable within the income tax bracket that you belong to. The Income Tax Department deducts TDS from the deposits. You can use Form 15G or 15H (for senior citizens) to avoid TDS. Investors use the 5-year investment plan to get tax benefits under Section 80C.
Start an FD for your parents to enjoy better rates and tax benefits:
Invest in your parents’ name for better interest rates and tax benefits. Most banks have a difference of 0.5 to 1% for investments in FDs for senior citizens.
We can conclude that if spare cash is available for some time, we should invest it in an FD. Following these tips will help you maximise and provide the best returns on FD while keeping your capital safe. By following these tips, investors can make informed decisions and get the best returns on their FDs while ensuring the safety of their investments.